Cyber has an ‘extremely high ceiling’ – a challenge worth embracing

The cyber insurance market is an increasingly volatile and evolving area, and though the threats are multiplying as fast as the technology allows, some insurers are not just reacting to change – they’re steering into it.

At the forefront of this movement is Dan Fox (pictured), head of cyber at Markel International, who brings more than a decade of experience in underwriting complex cyber and technology risks to the task. In an exclusive interview with Intelligent Insurer, Fox unpacked the reasons why insurers must remain adaptable in the face of uncertainty.

A high-stakes game of cat and mouse

“The recent Marks & Spencer and Co-op incidents have grabbed headlines, but they’re not isolated,” Fox explained. “They’re part of a trend of significant ransomware activity that stretches back many years.”

The severity of ransomware attacks might have “flatlined”, but their frequency has soared to unprecedented levels, and Fox attributed this shift to new actors flooding the scene: “These groups are filling the vacuum left behind by larger organisations dismantled by law enforcement or absorbed by nation states.

“Their tactics are more volatile and they’re even willing to physically threaten senior management and their families.”

He added: “Despite this, the root cause remains consistent around two themes: exploitation of vulnerabilities in the public-facing infrastructure or weak authentication within remote access solutions.”

For businesses, the stakes couldn’t be higher, and Fox warned that the financial and reputational consequences of an attack could be catastrophic. Markel’s role, he said, was to help clients form “a layered and resilient risk management strategy”, starting with identifying and quantifying risks, then providing secure risk transfer mechanisms for residual exposures.

The AI conundrum: opportunity or risk?

He outlined the three primary risks posed by AI. First: deep fakes, with Fox noting: “AI-generated phishing and impersonation scams, including voice spoofing, have become hyper-realistic.” Second was malicious code generation, which “while still maturing, is a capability that represents one of AI’s most frightening prospects”, allowing for unprecedented scale and sophistication.

“Finally, there’s non-malicious use creating vulnerabilities.” Fox continued, “Businesses adopting AI often unintentionally expand their attack surfaces while grappling with privacy and regulatory risks.”

Fox’s analogy is simple: “If I substitute my hammer for a nail gun, I still need to know which nails to use and where to place them. The same applies to AI; businesses need to select the right tools and derive maximum value, which isn’t easy.”

Embracing the challenge

“We invest heavily in the technical capabilities of our team and give them the commercial freedom to take calculated risks.”

When it came to industry preparedness, Fox observed: “Highly regulated businesses with a lot to lose – whether in reputation, revenue or regulatory penalties – tend to be the best prepared.” Still, he emphasised the importance of committing to long-term partnerships with businesses at all stages of their cybersecurity journeys: “For those in the earlier phases, our value-added services and new risk management platform can make a real impact.”

As cyber threats grow in complexity, insurers must adapt, which means viewing complexity as an opportunity, not an obstacle, or as Fox put it: “embracing the challenge of cyber”.

“We invest heavily in the technical capabilities of our team and give them the commercial freedom to take calculated risks,” Fox said.

However, the approach is far from passive; underwriters receive a lot of support, from modelling experts’ insights to real-time geopolitical intelligence.

“We avoid blanket positions on industries or geographies because each business needs to be judged on its own merits,” Fox stated. “But we also ensure we stay within our corporate risk appetite to mitigate systemic exposure and remain sustainable for the long term.”

Partnerships will be key

Markel is meeting the challenge head on by deepening investments in the sector, expanding its risk appetite and offering cutting-edge value-added services. “We’re an established market in cyber, but the sector is still in its infancy and has an extremely high ceiling,” Fox said.

“Those who work with us benefit from a hands-on, long-term partner who makes every effort to understand their unique needs.”

As cyber risks evolve, so must the strategies to combat them, including collaboration with third parties and real-time threat intelligence.

“We partner with leading security vendors throughout the insurance life cycle to support our offering and inform our underwriting. This includes in-house and external specialists for table-top simulations, ransomware negotiations, breach advice, forensic analysis and legal or technical expertise.

Looking ahead, Fox believes the cyber insurance industry must stay humble. “Cyber risk is not a matter of if, but when and how bad,” he warned, noting how the rapid evolution of threats, supply chain vulnerabilities and shifting privacy regulations made it challenging to stay ahead.

Despite the hurdles, Fox remains optimistic about the sector’s future. “The future will always be uncertain, but the underlying data has never been richer. We need to leverage what we do know to support our clients as they try to navigate this complex terrain,” he advised.

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